Sunday, April 12, 2009

The Housing Crisis - Some Common Sense ?

Listening to National Public Radio today I heard talk of offering homeowners, who were losing their houses/condos to repossession monies to leave sooner than otherwise would happen, leaving the dwelling in good shape. An example was given of a homeowner being given $2,500 to leave their unit in 30 days, rather than facing eviction. The homeowner in one example given owed $500,000 and it was estimated that the house would eventually be sold for around $189,000. While this example may be extreme, it brought ideas to my head.

Assume that these homeowners are delinquent on $500,000 owed on the house first. IF they owed such interest on a 30 year, 6% fixed interest loan, their payments would be close to $3000/month. If the interest rate was 8%, the payments would be almost $3700/month.

If the house were to be sold for $189,000 and the homeowner is paid $2500 to voluntary relinquish possession in 30 days, why couldn't another option the homeowner could have would be the following:

1.) a new $200,000 mortgage at 6% interest - payments of approximately $1200/month,
2.) a lien on the dwelling forbidding additional liens on the dwelling - essentially indicating that the lender "owned" the dwelling,
3.) provisions - that IF the dwelling was sold (or perhaps vacated) - that the lien holder would have certain rights, including a percentage of any profit, if the unit were sold.

Obviously, some homeowners could not qualify for the $200,000 loan, and thus couldn't qualify for such a plan. Where it might work, it would seemingly save everyone money and hassle.

I'm not trying to imply that creating such a program would be simple, however it would seem a good option to keep homeowner's in their homes and to save the government money.


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